But is this the best response to the economic slowdown?
What a difference a year makes. Just 12 months ago, companies were in a desperate scramble for talent. But that was then and this is now.
The economy has slowed markedly and today it’s austerity programs all round.
Leaving aside the countless headlines announcing layoffs there are other signs to suggest HR departments are facing different challenges than they were at this time last year.
Business for outplacement organizations has been booming as companies show more people the door. The outplacement service for online recruiting and HR solutions provider E-Cruiter.com has noted a 71 per cent increase in business since January, and the firm responded by opening seven new offices in the last six months. “The explosive growth of the outplacement side of our business is due in large measure to the demand from corporations in an economic downturn,” explained Michael Mullarkey, president of E-Cruiter.com.
Conversely, but equally revealing, some recruitment firms are taking a real hit. Last month, executive search firm Korn/Ferry International cut its workforce by 20 per cent because of a reduced demand for its services.
So how is HR handling the new challenges it’s facing during the slowdown? Not very well, said Eric Cousineau, a director with the strategic change consulting firm Johnston Smith International.
It was easy for HR to look good during the frantic days of the technology boom. As the new economy flourished and talent was scarce, HR departments were knocking themselves out — and apparently gaining stature with their executive peers — trying to find and hold on to good people. The new economy was a knowledge economy and human capital was supposed to be the most valuable capital of all.
“Companies were spending all kinds of money on headhunters and paying above-market salaries, but the minute the crisis hit they went back to their old ways,” he says.
The CEO says they need to stop the bleeding immediately, and so the layoff notices go out.
Companies aren’t even taking the time to be more selective in their layoffs, he said. They will end up throwing their babies out with the bathwater and end up looking for them again as soon as things start to improve, he added.
Cousineau recently met with one group of six employees laid off from a well-known technology company. The group had determined that in the year before the downturn hit, their former employer had spent about $350,000 on headhunter fees just finding them alone, and now all have been let go.
It is behaviour like that which suggests little has really changed and companies, for the most part don’t appreciate the importance of good talent any more today then they did in the past, said Cousineau.
But Iain Grant, of the Brockville, Ont. strategic consulting company SeaBoard Group Inc., said layoffs are the only option for many companies. When that is the case, it is far better for companies to cut deep — and quickly — than to drag the process out through incremental cuts.
To some people that may sound cruel, “but I’m more worried about the mental health of the survivors,” he said.
Nobody relishes destroying another person’s career, but most of these companies have to reduce head count or perish, he said. They are beyond the belt tightening stage, far better to cut more than necessary, bring everyone else together and explain that the cuts are over, nobody else is going and it is time to move on.
The good news, predicted Grant, is that the worst is probably over. The slowdown is being felt differently in different sectors of the economy, he said. But nobody was as guilty of over exuberance as the technology companies, the sector hit hardest by layoffs. In the months ahead the effects of the actions taken by companies hit in the early stages of the slowdown will likely work their way through the supply chain, but companies that take a hit downstream are unlikely to find themselves in a do-or-die position and will be able to survive it through less drastic actions, he predicted.
While Cousineau is disappointed in how HR is performing in this challenging environment, there are also signs that some HR departments are in fact handling the slowdown differently than in the past. The increased use of outplacement services suggests companies are more interested in taking care of the people they let go because they know they may want to call them back in the future, said Mullarkey of E-Cruiter.
While business has tailed off slightly in recent months, the leadership team at the Amherstburg, Ont., division of Honeywell decided to make every effort to resist layoffs. The reason? Even if business slows “slightly” more, they want to maintain staffing levels because they are predicting their market to pick up in early in 2003 and they know they will need those people then. “We have no intention of letting those people go. These are key positions and they are invaluable resources,” said Kimberly Michaelis, manager of HR.
Like many other organizations, not long ago Honeywell was struggling to find good employees, particularly at the managerial and supervisory level. In the past when people at that level would leave, it would take up to six months to find replacements, said Michaelis.
The company also now has a much better sense of exactly who its essential people are, and retention strategies have been put in place to make sure they won’t be lured away.
“We have tried to take a good hard look inside the organization. We want to make sure we are retaining the right people,” said Michaelis.
If they find somebody who they think has a lot of potential but there doesn’t appear to be anywhere on the org chart for that person to go, share options will be offered and a development plan structured to encourage her to stay.
And if in the past training budgets were always the first to be cut when budgets were trimmed, some companies are reluctant to go that route now. Honeywell has trimmed its training budget but only slightly, said Michaelis.
Another organization, a wholesale plumbing supplies company just outside Toronto, refuses to cut training budgets even though it is now facing layoffs (because of the uncertainty about their future, the organization asked not to be named).
Right across the board there has been a push on for employees to get more training, to expand skill sets and to even learn about different positions in the company, explained the manager of HR.
“We’ve done a heck of a lot more of it now than we have in the past — tremendous amounts of training,” he said. It’s a policy that comes right from the president because he believes having a highly-skilled, very competent and versatile workforce will be key to their success.
And while schools may be exempt from the effects of a sputtering economy, with cuts in funding from governments many have still been forced to do more with less.
But rather than simply laying off people as they would have in the past, Saskatoon Public School Division preferred to re-deploy employees. The objective was to not let anybody go, explained Gary Mearns, superintendent of human resources. “We are finding that the number of people retiring is on the rise and we don’t want to lose the skills in the existing staff,” he said.
Five years ago Saskatoon put more resources into recruiting to raise the quality of their workforce. Not only do they feel they have done a better job of hiring administrative staff, but they also have been training principals to do a better job of selecting teachers. The result has been a higher-quality workforce, and now they are resisting letting them go, he said. “We don’t want to turn around and let go of the very people we hired.”
The economy has slowed markedly and today it’s austerity programs all round.
Leaving aside the countless headlines announcing layoffs there are other signs to suggest HR departments are facing different challenges than they were at this time last year.
Business for outplacement organizations has been booming as companies show more people the door. The outplacement service for online recruiting and HR solutions provider E-Cruiter.com has noted a 71 per cent increase in business since January, and the firm responded by opening seven new offices in the last six months. “The explosive growth of the outplacement side of our business is due in large measure to the demand from corporations in an economic downturn,” explained Michael Mullarkey, president of E-Cruiter.com.
Conversely, but equally revealing, some recruitment firms are taking a real hit. Last month, executive search firm Korn/Ferry International cut its workforce by 20 per cent because of a reduced demand for its services.
So how is HR handling the new challenges it’s facing during the slowdown? Not very well, said Eric Cousineau, a director with the strategic change consulting firm Johnston Smith International.
It was easy for HR to look good during the frantic days of the technology boom. As the new economy flourished and talent was scarce, HR departments were knocking themselves out — and apparently gaining stature with their executive peers — trying to find and hold on to good people. The new economy was a knowledge economy and human capital was supposed to be the most valuable capital of all.
“Companies were spending all kinds of money on headhunters and paying above-market salaries, but the minute the crisis hit they went back to their old ways,” he says.
The CEO says they need to stop the bleeding immediately, and so the layoff notices go out.
Companies aren’t even taking the time to be more selective in their layoffs, he said. They will end up throwing their babies out with the bathwater and end up looking for them again as soon as things start to improve, he added.
Cousineau recently met with one group of six employees laid off from a well-known technology company. The group had determined that in the year before the downturn hit, their former employer had spent about $350,000 on headhunter fees just finding them alone, and now all have been let go.
It is behaviour like that which suggests little has really changed and companies, for the most part don’t appreciate the importance of good talent any more today then they did in the past, said Cousineau.
But Iain Grant, of the Brockville, Ont. strategic consulting company SeaBoard Group Inc., said layoffs are the only option for many companies. When that is the case, it is far better for companies to cut deep — and quickly — than to drag the process out through incremental cuts.
To some people that may sound cruel, “but I’m more worried about the mental health of the survivors,” he said.
Nobody relishes destroying another person’s career, but most of these companies have to reduce head count or perish, he said. They are beyond the belt tightening stage, far better to cut more than necessary, bring everyone else together and explain that the cuts are over, nobody else is going and it is time to move on.
The good news, predicted Grant, is that the worst is probably over. The slowdown is being felt differently in different sectors of the economy, he said. But nobody was as guilty of over exuberance as the technology companies, the sector hit hardest by layoffs. In the months ahead the effects of the actions taken by companies hit in the early stages of the slowdown will likely work their way through the supply chain, but companies that take a hit downstream are unlikely to find themselves in a do-or-die position and will be able to survive it through less drastic actions, he predicted.
While Cousineau is disappointed in how HR is performing in this challenging environment, there are also signs that some HR departments are in fact handling the slowdown differently than in the past. The increased use of outplacement services suggests companies are more interested in taking care of the people they let go because they know they may want to call them back in the future, said Mullarkey of E-Cruiter.
While business has tailed off slightly in recent months, the leadership team at the Amherstburg, Ont., division of Honeywell decided to make every effort to resist layoffs. The reason? Even if business slows “slightly” more, they want to maintain staffing levels because they are predicting their market to pick up in early in 2003 and they know they will need those people then. “We have no intention of letting those people go. These are key positions and they are invaluable resources,” said Kimberly Michaelis, manager of HR.
Like many other organizations, not long ago Honeywell was struggling to find good employees, particularly at the managerial and supervisory level. In the past when people at that level would leave, it would take up to six months to find replacements, said Michaelis.
The company also now has a much better sense of exactly who its essential people are, and retention strategies have been put in place to make sure they won’t be lured away.
“We have tried to take a good hard look inside the organization. We want to make sure we are retaining the right people,” said Michaelis.
If they find somebody who they think has a lot of potential but there doesn’t appear to be anywhere on the org chart for that person to go, share options will be offered and a development plan structured to encourage her to stay.
And if in the past training budgets were always the first to be cut when budgets were trimmed, some companies are reluctant to go that route now. Honeywell has trimmed its training budget but only slightly, said Michaelis.
Another organization, a wholesale plumbing supplies company just outside Toronto, refuses to cut training budgets even though it is now facing layoffs (because of the uncertainty about their future, the organization asked not to be named).
Right across the board there has been a push on for employees to get more training, to expand skill sets and to even learn about different positions in the company, explained the manager of HR.
“We’ve done a heck of a lot more of it now than we have in the past — tremendous amounts of training,” he said. It’s a policy that comes right from the president because he believes having a highly-skilled, very competent and versatile workforce will be key to their success.
And while schools may be exempt from the effects of a sputtering economy, with cuts in funding from governments many have still been forced to do more with less.
But rather than simply laying off people as they would have in the past, Saskatoon Public School Division preferred to re-deploy employees. The objective was to not let anybody go, explained Gary Mearns, superintendent of human resources. “We are finding that the number of people retiring is on the rise and we don’t want to lose the skills in the existing staff,” he said.
Five years ago Saskatoon put more resources into recruiting to raise the quality of their workforce. Not only do they feel they have done a better job of hiring administrative staff, but they also have been training principals to do a better job of selecting teachers. The result has been a higher-quality workforce, and now they are resisting letting them go, he said. “We don’t want to turn around and let go of the very people we hired.”
